Question

Two practical examples of complying with SEC fair disclosure regulation utilizing accounting information system.

Answer 1

Regulation Fair Disclosure, also commonly referred to as Regulation FD or Reg FD, is a regulation that was promulgated by the U.S. Securities and Exchange Commission (SEC) in August 2000. The rule mandates that all publicly traded companies must disclose material information to all investors at the same time.

The regulation sought to stamp out selective disclosure, in which some investors (often large institutional investors) received market moving information before others (often smaller, individual investors).

Regulation FD fundamentally changed how companies communicate with investors by bringing more transparency and more frequent and timely communications, perhaps more than any other regulation in the history of the SEC.

On April 2, 2013, the Securities and Exchange Commission said companies can use social media to disseminate information if certain requirements are met. As with company websites, investors’ access to the chosen social media platform must not be restricted and investors must be notified about which social media will be used to disseminate information.

HOW IT WORKS (EXAMPLE):

The Securities and Exchange Commission (SEC) issued a ruling in 2000 requiring publicly traded companies to disclose important information pertaining to the business finances, market, competition, and principals (i.e. material information) to shareholders at the same time. The regulation, known as Reg FD, or Regulation Fair Disclosure, was intended to level the playing field of information between large institutional investors and smaller or individual investors.

During the 1990s, companies instituted conference calls and briefings with market analysts. These calls were intended to offer in-depth information about the company and give people the opportunity to ask questions about particular issues facing the company. Companies would often allow institutional investors to participate in these calls. However, because of logistics and capacity, companies would not allow individual investors on the calls. In the end, the information disclosed on these calls gave unfair advantage to the institutional investors and their clients. By 1999, recognizing the lack of fairness in the available information about specific securities, the SEC ratified Reg FD.